Market Watch: KSE goes through the roof on reassurances over circular debt

Index gains 232 points on reports of Rs500b bond issue to tackle crisis.

KARACHI: The Karachi bourse witnessed another upbeat session on the closing day of the week as Pakistan Muslim League – Nawaz’s (PML-N) assurances to bail the economy out of the current crisis especially resolving the circular debt issue propelled investors to accumulate major beneficiaries of the move and pushing the bourse to set another historic high.

As the PML-N prepares to take office, the party leadership has made energy its top priority and is finalising various components of its plan to tackle the problem. Among the policies under consideration are cutting power supply to Karachi in order to increase supply to Punjab, privatising gas production and distribution companies, and issuing government-backed bonds to pay all or most of the Rs500 billion in existing circular debt – which means a cash injection into the energy sector boosting their profitability, hence the buying spree by investors in the sector.



The Karachi Stock Exchange’s (KSE) benchmark 100-share index climbed 1.08% or 232.39 points to end at the 21,823.05 point level. Activity does not seem to let go of the adrenaline rush fuelled by energy stocks as trade volumes peaked to another seven-year high to 647 million shares compared with Thursday’s tally of 638 million shares.

The power sector, particularly Pakistan State Oil, continue to dominate and lead the index over institutional interest as investors remain optimistic over the resolution of the circular debt with news reports suggesting issuance of Rs500 billion worth of bonds to neutralise the energy crisis, reported Harris Batla, analyst at Elixir Securities. Major contributors to the index were Hub Power Company MCB Bank, Oil and Gas Development Company and Pakistan Petroleum.

However, momentum in the energy sector was marginalised by small- and mid-tier bargain stocks which have been delivering staggering returns.



Pakistan Telecommunication Company that had remained a laggard in the previous rally picked up pace on hopes of receiving outstanding dues from Etisalat – major shareholder with management control of PTCL – on the back of strong relations between the incoming government and the United Arab Emirates.

Bank of Punjab has remained in the limelight throughout the week over expectations of recapitalisation of the bank by the PML-N government.

Shares of 397 companies were traded on Friday. At the end of the day 227 stocks closed higher, 136 declined while 34 remained unchanged. The value of shares traded during the day was Rs12.83 billion.

Bank of Punjab (rights issue) was the volume leader with 51.05 million shares gaining Re1 to finish at Rs5.16. It was followed by NIB Bank with 46.44 million shares gaining Rs0.32 to close at Rs2.97 and TRG Pakistan with 46.35 million shares climbing Rs0.93 to close at Rs11.81.

Foreign institutional investors were net buyers of Rs492 million, according to data maintained by the National Clearing Company of Pakistan.

Published in The Express Tribune, June 1^st, 2013.

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